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It can be nerve-racking to get a car insurance cancellation notice from your insurer. After all, it’s illegal to drive without insurance in most states. And without coverage, you could be on the hook for accident-related medical bills and vehicle damage.
Fortunately, there are some things you can do to help prevent a cancellation. And if your policy does get canceled, there are ways to get new coverage.
Can they really cancel my policy without asking?
Your insurance company can cancel your policy, but they have to provide written notice before they do. The amount of time they have to give you varies by state. If you have questions about policy cancellations, it’s a good idea to check with the department of insurance in your state.
Unlike a nonrenewal, which only occurs at the end of the policy term, cancellations can occur at any time. Non-renewals may happen for many reasons, which might include too many moving violations, a change in your credit, and filing too many claims. But car insurance cancellations can typically only occur for a few reasons.
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Why do companies cancel policies?
In general, insurance companies can cancel your policy for any reason during the first 60 days the policy is active. However, they don’t typically cancel policies for no reason. It’s usually because the risk you present to the insurer has changed since you applied.
Common reasons why policies are canceled
Laws vary by state, but if your policy has been in effect for more than 60 days, there are usually only a few reasons an insurer can cancel your policy midterm. They may include:
- You didn’t pay your bill. Insurance is no different than any other service you pay for. If you don’t pay your bill, it will be canceled. Most insurance companies offer a grace period — usually 30 days — following your payment due date. If you bring your payments up-to-date during the grace period, the insurance company will typically keep your policy active.
- You lied. This includes lies of omission as well. If you weren’t (entirely) truthful when you completed your application or filed a claim, your insurance may be canceled.
- Your license was suspended or revoked. States can suspend and revoke licenses for multiple reasons. Examples include driving under the influence of alcohol or drugs, having too many points, and having unpaid parking tickets. If the state suspends or revokes your license, your insurer typically has the right to cancel your policy.
- Your health status changed. If you were diagnosed with a medical condition that makes it unsafe for you to drive, the insurer may be able to cancel your policy.
What to do if your policy is canceled
The first thing to do after receiving a car insurance cancellation notice is to contact your insurance company. Depending on the circumstances, they may be willing to reconsider. If they won’t, you should start shopping for new coverage right away.
You can start your search with traditional insurers. But if you’re unable to find coverage, you may have to check with companies that specialize in insuring high-risk drivers. And if you still can’t get insurance, you might need to check out your state’s assigned-risk insurance pool. Insurers that participate in these pools must accept drivers the state assigns to it, no matter how much of a risk they present.
Regardless of where you get insurance, you don’t want to let your policy lapse because it could leave you exposed to financial losses if you’re in an accident. Plus, it sets off a chain reaction of events that might include:
- Fines if you’re caught driving without insurance
- Higher premiums when you get coverage again
- Suspension of your vehicle registration
- Repossession of your car if you’re leasing it or have an auto loan
How to get reinstated
If your insurance company cancels your policy because of nonpayment, you may be able to get them to reinstate it. It’s typically easier to have the policy reinstated if you’re within the grace period and it hasn’t lapsed yet. If your policy has lapsed, it’ll be tougher. But the rules for reinstatement vary by insurer, so it may be worth a call to your insurance company.
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If you received a car insurance cancellation notice because you haven’t paid the premium, contact your insurer right away. They may be willing to reinstate your policy if you pay what you owe, plus interest and fees that accrued.
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If the insurance company agrees to reinstate your policy, you might have to sign a form that says you didn’t experience any losses during the grace period. And you agree not to file any claims with the insurance company from incidents that occurred during that time. Having the insurance company reinstate your policy is typically the best option because you maintain continuous coverage, and you don’t have to search for a new policy. Still, your insurer may raise your rates.
How to avoid your policy getting canceled
There are things you can do to help prevent a car insurance cancellation.
- Pay on time. If you know you won’t be able to make your payment, contact your insurance company right away. They may be willing to work with you to set up a payment plan so you can keep your coverage active.
- Tell the truth. Don’t try to hide things from the insurance company to get a lower rate or make it look like you weren’t at fault for a claim.
- Follow the rules. Don’t give your state a reason to suspend or revoke your license. Reckless driving and driving under the influence of drugs or alcohol aren’t the only infractions that may lead to the suspension of your license. Your state might also suspend or revoke your license for not appearing in court, not paying fines, leaving the scene of an accident, and more.
If you receive a car insurance cancellation notice from your insurer, find out if you can have your existing policy reinstated. If not, you’ll need to find new coverage quickly so your policy doesn’t lapse.
This story originally ran on KBB.com.
